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An Operations Manager Ran Up Credit Card Charges Without Authorization

In response to a Financial Industry Regulatory Authority (“FINRA”) Complaint filed on March 11, 2011, without admitting or denying the allegations, Respondent Dareth Martin submitted an Offer of Settlement (Offer) whereby she consented to the entry of findings and violations, and to the imposition of sanctions. FINRA Department Of Enforcement, Complainant, versus Dareth Martin, Respondent (Order Accepting Offer Of Settlement, OHO #2009019349301, May 2, 2011).

Background

Respondent Martin was employed between November 2001 and August 2009 at Creech Financial Group, LLC, which has been affiliated with FINRA member firm National Planning Corp. since March 2003. Martin was registered as a Series 6 representative with National Planning Corp. from August 2006 until August 20, 2009. Her job title with Creech Financial was Operations Manager.

As Operations Manager, Respondent Martin had signatory authority for

a bank-issued Creech Financial credit card,

for a Creech Financial business checking account, and

a personal credit card in the name of the owner of Creech Financial that was used for business expenses.

Misappropriation

From 2004 through 2009, without authorization, Martin was charged with misappropriating at least $81,670 from Creech Financial and its owner, by engaging in the following conduct:

Between 2004 and 2009, she used her employer’s personal credit cards to purchase items for her own use; for example, she purchased at least $33,402 from online retailers, including clothing stores, through accounts she set up.

Between 2005 and 2009, she issued or caused checks to be issued to herself for unauthorized bonus payments totaling at least $22,166.

Between December 2007 and April 2009, she purchased without authorization at least $1,114 of electronic equipment for her own personal use through a Creech Financial business credit account.

Between 2006 and 2009, she issued checks from Creech Financial's business checking account to herself that were designated in the as "petty cash," but frequently did not represent actual cash expenditures by the business. Also, she made cash withdrawals from the Creech Financial business checking account that exceeded the actual business expenses by at least $23,385.

Between February 2008 and July 2009, she issued checks from Creech Financial's business checking account to pay in excess of $1,603 for personal items, such as groceries, personal hygiene products, and housewares.

FINRA Investigates

On January 13, 2011, FINRA’s Department of Enforcement (DOE) duly notified Respondent Martin to appear for testimony in Washington, D.C. on February 7, 2011. On January 20, 2011, Martin sent a letter replying that she would not appear for testimony. Martin referred DOE to a letter she had previously provided in response to a preliminary inquiry in this matter, and additionally wrote:

Due to financial constraints and emotional stress from events related to this matter, I regret to advise your office I will not be able to attend the hearing [sic] on February 7, 2011.

In order to try to accommodate Martin's financial condition, DOE offered to make alternative arrangements which would not require Martin to travel to Washington, D.C, such as testifying in Charlotte or by telephone. Although Martin eventually responded, she did not provide a time to contact her or offer to testify. On February 7, 2011, DOE renewed its offer to seek alternative accommodations but Martin subsequently refused to appear for testimony and never did.

Charges

Subsequently, FINRA charged that by:

misappropriating and converting funds or other assets to her own use, Martin violated NASD Rule 2110 (for conduct up to and including December 14, 2008) and FINRA Rule 2010 (for conduct on or after December 15, 2008); and

Accordingly, FINRA barred Respondent Martin from association with any FINRA member firm in any capacity.

Bill Singer's Comment

This case is chilling and instructive on a number of levels.

We are reminded that notwithstanding such august titles as Operations Manager, that the pressures and stresses of life reach down to all folks. Good people can find themselves doing bad things, and bad people find themselves encouraged to persist. However, while the fashion of the day is to see much of Wall Street's misconduct through the prism of the Great Recession, Respondent Martin's shenanigans largely occured prior to the markets' meltdown in late 2008 and 2009. As such, any sympathy factor for her is severely reduced.

For some on Wall Street, this case may come as a shock -- after all, nothing that Respondent Martin was charged with seems to involve the theft of customer funds or any aspect of the "securities" business. Nonetheless, if you were to ask the regulatory community, the industry's cops would disagree. They would argue that the conduct here goes to the very integrity and credibility of those who service the public, and that such transgressions must be rooted out. Often, that is a persuasive line but not always.

According to the terms of Respondent Martin's Offer, she did not admit or deny the facts asserted in FINRA's Complaint. Still, as alleged, her actions seem to rise to the level of criminal conduct. Given that Wall Street's regulators have far too much on their hands when dealing with fraud against the investing public, the industry's cops need to be careful about diverting too much time, staff, and energy towards cases that other civil and/or criminal authorities could (if not should) handle. Nonetheless, I can't truly quibble with proceeding against a Respondent such as Martin where the individual refuses to testify. In such a case, the path for FINRA is relatively simple and worthwhile to pursue.